Wednesday, November 16, 2011

The American Dream (and Other Benefits of Owning a Home)

Realtors, mortgage lenders, economists and all sorts of other professionals who have a little skin in the game are quick to tell you to buy a home, if you can.  I believe most people who are sitting on the fence have some sort of apprehension, thinking of all the headaches along the way.  Homeownership, as it stands today, has a mistaken reputation.  "Foreclosures", "Short Sales" and other distressed home lingo dominate the headlines.  What is interesting is a recent poll by the National Association of Realtors (NAR) finding that 95% of homeowners and a surprising 72% of renters say that owning a home for a period of several years is a far better financial decision than renting.  77% of homeowners also mentioned that simply owning a home is the biggest contributor to their long term financial goals. 

So with all the naysayers, sitting in their towers, naysaying, I thought I'd come along and mention some of the beautiful reasons why owning a home is so beneficial:

1)  Tax Advantages
Ok, so when I mention tax advantages, most people glaze over and check the next line item.  Before you get there, take a second to see what kind of money homeownership will save you.  To be fair, to get the majority of tax advantages, you need to have a mortgage (i.e. debt).  Since the mass majority of us need some "help" in the form of a loan, I'll assume we all have a mortgage.  With that mortgage, every month you pay a portion of "principal" and "interest".  Your mortgage interest is tax deductible.  In the early years of a mortgage, the majority of your payment is interest, so especially when you first buy a home, your mortgage interest deductions are much greater.  Say you have a $1200 dollar payment.  About $1080 per month is interest and is deductible, so over a year, it reduces your taxable income about $13,000 per year.  Pretty nice, eh?  Among other great tax deductions are your property taxes, mortgage related closing costs and home equity lines of credit interest.  It really starts to add up.

2)  Financial and Physical Security and Stability
One major difference between buying and renting is that when you own your home, chances are you have a fixed mortgage that will never increase.  How many times have you been in a rental apartment and you were certain that your landlord wouldn't raise your rent?  Could you guarantee that your rent wouldn't be raised over the next 30 years?  Unless your landlord is your Mom and you live in her basement, you would be crazy to think that.  That's what is great about homeownership.  You can always count on a stable payment every month, that won't go up (unless you have an Adjustable Rate Mortgage).  Beyond just financial security and stability comes physical security.  A study by NAR revealed that with more homeowners and less renters, neighborhood turnover rates were lower.  With lower turnover rates, less crime was being committed and reported.  Turns out that since homeowners are more consistent neighborhood stewards, riff-raff was more likely deterred. 

3)  The American Dream
Homeownership comes with a myriad of advantages.  The most well known, and most attacked idea, is the notion of owning the American Dream.  Homeownership provides you the luxury of planting roots, settling down and focusing on the more important things in life.  NAR studies show that homeowners are more likely to volunteer and contribute to neighborhoods and communities.  Their children are more likely to participate in organized activities and actually watch less TV.  Now there is a novel idea!  From my own experience, I can say that homeownership keeps you grounded and gives you a sense of belonging.  My parents still live in the very first home they bought over 30 years ago.  All of my memories revolve around that home from birthdays to Christmases, all the good (and bad) times.  I truly believe a home is what helps solidify a family.  On top of stronger, more engaged families, homeowners have a sense of pride in their home and their neighborhood.  They want to build relationships with neighbors and they want to keep their homes in good shape.  Homeownership isn't merely an action, it is a state of mind.

Tuesday, November 8, 2011

These Incentives Will Sell Your Home

Incentive: noun; Something that incites or tends to incite action or greater effort as a reward.

If you've had your home on the market for a couple of months with very bites or nibbles you might be in quite a pickle.  What if you've lowered your price as much as you can, just up to the point of making your sale a short sale?  What if you've improved the curb appeal, cleaned the entire house, replaced all the appliances, painted, carpeted, or staged and the home still hasn't sold?  If you're up against a wall, there are some incentives or perks to offer your buyers to make your home stand out from all the others.

1)  Help With the HOA Dues
For most first-time home buyers, the "add-ons" of taxes, HOA's, insurance and all the other little things beyond just a simple mortgage payment can really add up.  They're used to just paying just one simple rent check.  They see all the extra numbers and wish they could go away for a while.  What if you could help them manage that?  A savvy agent will be able to craft an incentive that will help pay HOA dues for six, nine, or twelve months, or maybe even more.  That way your buyers can ease into home ownership and you can stand out among other houses in your neighborhood.

2)  Offer a Bonus to the Buyer's Broker
If you want to get people to come take a look at your home, you need to first convince agents that your home is worth taking a look at.  If it is in the same condition, looks the same, and is similarly priced as your competition, how can you nearly guarantee that your home will be shown?  Offer the buyer's realtor a bonus to sell the house.  The bottom line is, realtors will always know what commission they can expect to sell a home but, if you offer a bonus, maybe they'll try a little bit harder to get yours sold.  Depending on the size of value of your home, you could offer a $1000-$2000 bonus, they buyers may never even know!

3)  Assist with Closing Costs
This is a more common incentive that helps folks with little to no down payment get into a home without needing a lot off extra cash to pay loan fees, escrow fees and mortgage insurance.  Typically, beyond having to put money down to pay for the home, buyers also need to pay for all sorts of closing costs.  As a rule of thumb, you could offer anywhere from $1000 to $5000 to help cover the closing costs of your buyers.  The benefit to you is you get your home sold; the benefit to the buyer is they don't have to come up with all that cash at time of closing. 

4)  Help Pay Down Your Buyer's Interest Rate
If there is one cheap method to entice your buyers to save tens of thousands of dollars over the life of their loan, this is it.  Offer to work with the buyer's lender to help pay down their interest rate.  A few "points" (1 point = 1% of purchase price) added to the deal can get your home sold quickly, and will reduce your buyer's monthly payments. It also assures that no matter what they do, when they buy your house, they will get below market interest rates. 

Hint: Hey buyers out there...If you're reading this, now you have a little ammunition when you're making your know what incentives you might be able to ask for!

As always, some of these incentives may or may not work for particular situations.  If you're not sure you can always ask your savvy realtor.  If you need one of those, I know one--he looks just like me and isn't my twin brother Jeff. 

Tuesday, November 1, 2011

Market Statistics to Sink Your Teeth Into

September market statistics are out and available for viewing here

Scroll through the commentary to get to the meat of the statistics.  Numbers are what drive economies.  It gives us a gauge as to where we stand, whether good or bad.  Northern Colorado is broken down into three different markets, Greeley/Evans, Loveland/Berthoud, and Fort Collins.  These three markets are again broken down into sub-categories of detached (single family homes) and attached (condos, townhomes, and similar). 

Realtors rely on a number of variables when understanding the market and which way we're moving.  I conduct my understanding of the market based on three key statistics: number of listings sold, days on market, and median price.  The reason why the number of listings sold is so important is because that represents the true market.  Knowing how many homes are actively on the market doesn't indicate anything, unless you know what has sold.  Think about it, the only way to truly measure how much inventory is getting moved is how much is sold, not how much is on the shelf.  That's why I don't focus much on "active listings".  Average days on market indicates how long a home is for sale, which gives you a good idea of how long it takes for inventory to move.  On top of that, median sales price gives a good indication as to which direction the market is moving, up or down.  Having statistics through the third quarter gives us enough of a sample size to understand 2011's market.

Below is a breakdown and interpretation of each market.

Fort Collins detached home sales for 2011 are just trailing 2010 just slightly with a drop off of 2.7%.  Normally this would be a negative sign; however, the due to the 2010 first-time home buyer tax incentive of $8000, multitudes of home buyers were able to jump into the market early in 2010, as opposed to sometime in 2011.  Noticing the attached sales, we're far ahead of 2010.  Median sales prices are just slightly higher in 2011, meaning home prices aren't falling (good news to all you sellers).  The reality of short sales and foreclosures continues to impact the market, but not in sales price, just days on market, in which we have seen a slight increase in 2011.  Overall, the Fort Collins market in both attached and detached homes have been very healthy in 2011 and will continue to stay strong in the next year. 
Loveland/Berthoud home sales (both attached and detached) have outpaced 2010 through September, which is a very positive signal.  Considering the tax credit from 2010, Loveland is faring very well as we climb out of the recession.  Attached home days on market has increased significantly, where as detached days on market has remained stable.  Median prices are coming in a bit higher for detached homes and nearly even with detached homes.
The Greeley/Evans is fairly consistent with the rest of the region.  There is a slight reduction in detached units sold, but once again keeping in mind the tax credit from 2010, the market is healthy.  Days on market for attached homes have decreased significantly, where detached homes have increased.  Year to date median home price averages are slightly lower as the short sale and foreclosed homes in area are decreasing home values.  Greeley/Evans and most of Weld county was hit hard by distressed properties, and considering the amount of foreclosures and short sales that have gone through, the price dips are actually promising.  Another glimmer of hope for Weld County is the oil and gas production increases that are being projected.  With workers and servicers soon moving to call Weld County home, property prices will be expected to recover.